EUR: Fed rate cut expectations boost EUR/USD – Danske Bank

FXStreet Insights Team FXStreet

The Euro (EUR) is gaining against the US Dollar (USD) as markets price in a December Federal Reserve rate cut, shifting structural drivers back into focus. European natural Gas prices have fallen to their lowest since early 2024, giving EUR/USD a boost as European manufacturers regain competitiveness, though a sudden cold spell could tighten the market and reverse gains, Danske Bank's FX analyst Kirstine Kundby-Nielsen reports.

Low European Gas prices support Euro gains

"We now expect the Federal Reserve to cut interest rates in December. It means structural drivers could take the forefront again and start push EUR/USD higher."

"EUR/USD is also getting support from an unexpected side, namely the natural Gas market. The European natural Gas price has dropped to the lowest level since early 2024 and the spread to US natural Gas prices has narrowed to the tightest level since 2021. This is good news for EUR/USD as European manufacturers regain competitiveness, while US energy exporters lose revenue."

"European natural Gas storages are low for this time of year; hence, this benign environment for EUR/USD could end if the temperature suddenly drops in Europe and the need to draw down inventories rise leading to tighter market conditions and a rebound in European prices."

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

EUR/USD pops to yearly highs near 1.1770

EUR/USD rapidly reverses course and hits fresh YTD tops near 1.1780 at the end of the week. The pair’s U-turn comes on the back of the intense sell-off in the Greenback amid the generalised risk-on context.

GBP/USD climbs to four-month tops near 1.3600

GBP/USD is building on its solid weekly advance and is pushing toward the 1.3600 hurdle on Friday, or new four-month peaks. Cable’s strong move higher comes as the Greenback intensifies its decline, while auspicious results on the UK calendar also collaborate with the uptrend.

Gold picks up pace, approaches $5,000

Gold prices keep their uptrend well in place and gear up for an imminent hit to the key $5,000 mark per troy ounce on Friday. The yellow metal’s sharp advance gathers pace amid the increasing weakness in the US Dollar and mixed US Treasury yields across the curve.